Look At The Venue Language In Your Agreements

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After punishing loyal readers over the last two weeks with a two-part, 4,704-word exploration of rice, Oriental cuisine, and (yes) tenant exclusives, we will now retreat to a relatively simple, unconvoluted posting. It will be short. But, wise readers will want to look at a few sentences buried inside the boilerplate of their form agreements – leases, guarantees, and so forth.

There may be a state courthouse in every county throughout the United States, but that’s not true about federal courthouses. [We’re not even sure that every U.S. County has its own courthouse. That’s something that requires “local” knowledge.] But, you don’t have to have a courthouse in your county to be subject to a federal court’s jurisdiction. There is something called, “venue.” That’s the county or district housing the courthouse where criminal or civil cases must be heard. Courthouses are “venued” in a particular location even though they can have jurisdiction over a much larger area than just their county of venue. The trick is that the boundaries of a “district” and that of a “county” are not the same. With perhaps a very small number of exceptions (known to some readers located in those places), a federal court’s “district” encompasses a number of counties (in Louisiana, “parishes”). For example, New Jersey has one Federal “District,” the “District of New Jersey,” but it effectively has three (lower case) “districts” with courthouses in Camden, Newark, and Trenton. California and New York each have four (upper case) “Districts,” but a lot more courthouses. For example, in New York, there are 11 federal courthouses.

So, what’s the point of all of that? Well, even though New York has 11 federal courthouses, it has 62 Counties. That means there are 51 New York Counties without a federal courthouse. Yes, there is federal jurisdiction over those 51 courthouse-deficient counties, but there are no federal trials in any of them.

So, when an agreement says: “Venue for litigation shall be in Linn County, Oregon,” can the parties file a suit in a federal courthouse? In Oregon, there is one “District,” the “District” of Oregon, and there are four “districts,” each with a federal courthouse, but none of those are in Linn County. The “district” that handles cases from Linn County is in Lane County, specifically in Eugene, Oregon.

The answer, according to what appears to be all courts is, “no, when you write: ‘Venue for litigation shall be in Linn County, Oregon,’ the parties cannot maintain a federal lawsuit.” “Venue” means physical location. There is no U.S. courthouse in Linn County. Thus, under an agreement that uses those words, you can’t file suit in the federal courts. The federal courts are not venued in Linn County.

Why did today’s thoughts come to mind today? It isn’t because we hadn’t known about this before. In fact, we have buried this lesson in blog postings of long-ago. We were reminded about it because, on May 29, the United States Court of Appeals for the Ninth Circuit issued an Opinion further bringing the message home. In at least the Second, Fourth, and Ninth Circuits, you can’t even transfer a state court dispute from a state court in a County (such as Linn County) to a federal court if there is no courthouse in the specified county even if Federal Rules would permit such a “transfer.”

So, if you want the ability to litigate your dispute in a federal court, but you also want to keep the proceedings relatively close to a particular geographical location, then don’t limit actions to a county where no federal courthouse is located. You can either locate the particular federal courthouse where the proceeding will take place or you can use a universal provision like: “Lawsuits to enforce this Agreement may only be brought and pursued in a state or federal court of competent jurisdiction for the county and state in which the property is located.” If you don’t want to permit a suit to be filed in a federal court, you can write: “Lawsuits may only be brought and prosecuted in the state courts of [Name of State] situated in the county where the property is located and may not be brought, prosecuted or transferred to a federal court.”

So, again, readers may want to look at their own documents and decide if they like what they see.

Next week, we’ll keep it short again and will cover a similar “near boilerplate” topic. But, next week’s calendar will force us to delay the Ruminations’ posting until late Monday or even early Tuesday morning.


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